Hong Kong homebuyers shift to small flats after relaxed mortgage
The price growth of mid-sized flats outperformed Class A properties and the overall market
In Hong Kong, homebuyers have shifted their preferences towards small flats due to the easing of mortgage financing schemes, reported Hong Kong Business.
Under the relaxed mortgage financing schemes, the cap for loan-to-value (LTV) ratios for units with values below HKD8 million (previously HKD4 million) was set at 90 percent and 80 percent for units with values between HKD8 million and HKD10 million (previously capped at HKD6 million) in 2019.
According to analysts from JLL, relaxed lending guidelines have resulted in a price increase of mid-sized residential flats over the past 21 months.
JLL’s Residential Sales Market Monitor indicates that the price of Class B properties increased to 4.7 percent, while Class C properties rose to 5.8 percent following borrowers’ increased mortgage entitlements.
Additionally, the price growth of mid-sized flats has surpassed Class A properties (two percent) and the overall market (2.9 percent).
Norry Lee, senior director of projects strategy and consultancy department at Hong Kong JLL, said the eased lending guidelines will shift homebuyers’ focus to small units “where the lump sums are able to fit into the LTV ratio cap.”
More: Survey shows “wait-and-see” attitude among Hong Kong homebuyers
“It is healthier for the market if the progressive ladder of LTV ratio is smoothed out, allowing properties above HKD10 million a higher LTV ratio of say 70 percent for HKD10 million to HKD12 million units and so forth. Facilitating upgrading will eventually help release more units in the secondary market and re-establish the housing ladder,” he added.
On top of this preference shift, the lending scheme also ‘significantly changed developers’ building strategy, according to Nelson Wong, head of research at JLL in Greater China.
The Property Report editors wrote this article. For more information, email: [email protected].
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